What a rate has to cover, and how to say so
A freelance rate pays for billable work, the unbilled time needed to run the business, business expenses and benefits the writer must fund. Comparing it with employment therefore requires the full cost of an employee and a realistic estimate of productive working time.
Costs and unbilled time
A rate should be calculated from required gross income, expected working and billable hours, taxes and all direct and indirect costs. Assessing the required rate also helps determine which jobs to accept. Business expenses, health insurance, holidays and sick pay remain the freelance’s responsibility, whereas an employer funds employee benefits. One practitioner’s rule of thumb is to charge twice, or preferably three times, the hourly employee rate at the same level, using salary surveys for the comparison.
Proposals and negotiations before an order arrives consume working time. A 2013 comparison could not measure that time systematically because much of the data was missing and used a rough estimate of at least twenty-five percent of actual working time.
A client may multiply a hundred-dollar hourly rate into four thousand dollars weekly and two hundred thousand yearly and compare that figure with a salary. A 2007 explanation of freelance fees instead estimated an employee’s cost at thirty to seventy percent above the paycheque, depending on the business, benefits and overhead. Its proposed fee-for-service argument is that the contractor charges for productive work on the job while an employee receives a salary regardless of productivity. Where a competitor charges less, the writer can explain how experience enables faster or better work and how full-time availability can support dependability, deadlines and short-notice requests.
Recurring expenses
In AMWA’s 2019 survey, 174 full-time freelances reported the following recurring business expenses for 2018; respondents could select every applicable category.
| Expense | Respondents reporting it (%) |
|---|---|
| Professional dues and subscriptions | 93.7 |
| Tax accountant | 70.1 |
| Office utilities | 62.6 |
| Education and professional development | 60.3 |
| Health insurance | 48.9 |
| Unreimbursed business travel | 33.9 |
| Errors and omissions or general liability insurance | 31.0 |
| Marketing | 27.0 |
| Office space | 25.3 |
| Life insurance | 23.6 |
| Licensing fees | 23.6 |
| IT support | 23.0 |
| Lawyer or legal advice | 19.5 |
| Disability insurance | 17.8 |
| Other | 8.6 |
| Administrative help | 7.5 |
The question excluded large one-off purchases such as furniture, and the survey’s distribution mainly through dues-paying AMWA members helps explain the high membership-cost share.
Comparison with employee costs
An employee’s salary omits incidental employment costs and overhead that a freelance funds within the fee. Incidental costs include employer contributions for health and unemployment insurance, pensions, maternity or paternity leave and other benefits that vary by country. Overhead includes administration, supervision, human resources, payroll, travel or meal subsidies, workspace, equipment, software licences, training, insurance, maintenance and cleaning.
A 2014 European comparison used the 2012 EMWA surveys’ mean annual employee salary of €61,505 and mean freelance hourly rate of €77. Simply multiplying €77 by 37.5 hours and forty-seven weeks yields a gross projection of €135,713, before allowing for unbilled work or employment costs. The cost comparison instead estimated productive working days and total employee costs.
Productive working days
The comparison used this illustrative annual working-time calculation.
| Item | Days deducted | Days remaining |
|---|---|---|
| Weekdays in the year | — | 261 |
| Holidays | 32 | 229 |
| Formal training | 5 | 224 |
| Continuing professional development | 5 | 219 |
| Sickness | 7 | 212 |
| Wasted or unproductive time | 42 | 170 |
Holidays comprised twenty-five days of annual leave and seven public holidays, with country variation of roughly five days either way. The model assumed 170 productive days for both freelances and employees, despite country differences in leave and sickness. Freelance annual earnings were therefore €77 × 7.5 hours × 170 days = €98,175.
Employment costs and overhead
The official incidental-employment-cost factors used for 2012 were as follows; multiplying gross salary by the factor includes incidental costs but excludes employee overhead.
| Country or group | Factor |
|---|---|
| EU average | 1.32 |
| More expensive country group | 1.39 |
| Cheaper country group | 1.22 |
| Sweden | 1.52 |
| France | 1.50 |
| Belgium | 1.47 |
| Italy | 1.41 |
| Lithuania | 1.40 |
| Czech Republic | 1.37 |
| Spain | 1.37 |
| Estonia | 1.37 |
| Austria | 1.37 |
| Slovakia | 1.36 |
| Hungary | 1.34 |
| Romania | 1.31 |
| Netherlands | 1.30 |
| Greece | 1.29 |
| Finland | 1.28 |
| Germany | 1.28 |
| Latvia | 1.27 |
| Portugal | 1.26 |
| Cyprus | 1.21 |
| Poland | 1.20 |
| Bulgaria | 1.19 |
| Ireland | 1.18 |
| Slovenia | 1.17 |
| United Kingdom | 1.16 |
| Luxembourg | 1.15 |
| Denmark | 1.15 |
| Malta | 1.10 |
For total employment cost, business-advice estimates ranged from gross salary plus sixty-four percent in France to a factor of 1.7 in Germany and doubling salary in a UK rule of thumb. An illustrative UK employee-cost spreadsheet gave the following calculation in euros.
| Item | Cost (€) | Running total (€) |
|---|---|---|
| Salary | 42,000 | 42,000 |
| Recruitment or advertising and selection | 4,200 | 46,200 |
| National insurance | 4,710 | 50,910 |
| Private healthcare | 1,000 | 51,910 |
| Life insurance | 100 | 52,010 |
| Company pension | 1,000 | 53,010 |
| Software licences | 1,200 | 54,210 |
| Training and continuing development | 1,200 | 55,410 |
| Workstation | 9,000 | 64,410 |
| Share of buildings, facilities and insurance overhead | 1,000 | 65,410 |
| Capital-equipment depreciation | 100 | 65,510 |
| Consumables | 100 | 65,610 |
| Administration, HR, payroll and secretarial overhead | 2,400 | 68,010 |
| Total-cost factor | 1.62 | — |
That example omitted maternity and paternity leave, unfair-dismissal claims, redundancy, jury service, sick pay and holiday pay. With no comparable official overhead estimate available, the European model used the midpoint between the official incidental-cost factor of 1.32 and the highest total-cost estimate of 2.00, giving 1.66. Applying 1.66 to €61,505 yielded an annual employee cost of €102,098.
For regional comparisons, the twenty-seven countries were divided into the highest and lowest fourteen incidental-cost factors, with Greece included in both groups. Adding an overhead increment of 0.34 to the group means of 1.22 and 1.39 gave total factors of 1.56 and 1.73. The resulting comparison was as follows.
| EU group by incidental cost | Mean salary (€) | Total-cost factor | Employee cost (€) | Freelance earnings (€) | Employee cost minus freelance earnings (€) |
|---|---|---|---|---|---|
| Cheaper | 61,505 | 1.56 | 95,948 | 98,175 | −2,227 |
| All | 61,505 | 1.66 | 102,098 | 98,175 | 3,923 |
| More expensive | 61,505 | 1.73 | 106,404 | 98,175 | 8,229 |
Interpretation of the comparison
On those assumptions, freelance and full-time employee costs in Europe were similar. A UK study cited in the comparison reported that freelances and small businesses did not bill a third of time spent on client work; the European model did not deduct this, and its authors estimated that even ten percent unbilled time would make freelances appreciably cheaper. Clients can obtain freelance help during peak workload for a limited period without the usual incidental employment costs and with little employee overhead.
The model used a common freelance rate across countries, while the survey’s salary mean did not represent every EU country, though it included major medical-writing markets. Employment-cost assumptions were for office employees generally rather than specifically for medical writers, and incidental costs and overhead varied by country. Employers could also incur some overhead for visiting freelances, which the model did not estimate. The same overhead increment was used across country groups because high expected overhead in the UK and Denmark coincided with low incidental employment costs.
A separate US comparison using the 2015 AMWA survey reported full-time freelance mean gross income of $131,400 and employee salary of $90,200. Freelances reported spending thirty to thirty-five percent of gross income on expenses and overhead, reducing their mean income to $85,410–$91,980, while employee compensation also included benefits beyond salary.